1 Is the income you derive from your employment in Country Z assessable in Australia?
1 Yes. Question 2 Is the income you derive from your employment in Country Z or other foreign countries assessable in Australia? Answer 2 Yes. This ruling applies for the following periods : Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX The scheme commenced on: 1 July 20XX
You are a resident of Australia for taxation purposes. You are employed by Employer Z whose head office is in Country Z. You are a full-time employee of Employer Z. You have a visa which your employer applies to renew on your behalf. Your current visa is valid until a future year. Due to the nature of Employer Z's operations most of your employment duties are to other foreign countries. Your employment duties are not carried out in Australia. You carry out some of your duties in Country Z. You pay income tax on the income earned from Employer Z in Country Z. Your employer complies with all relevant local taxation obligations. You work exclusively for Employer Z.
Income Tax Assessment Act 1997 section 6-5 International Tax Agreements Act 1953 section 4
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, in determining liability to tax on the foreign source income of an Australian resident, it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreement. Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country Z Agreement is listed in section 5 of the Agreements Act. The Country Z Agreement operates to avoid the double taxation of income received by residents of Australia and Country Z.
The relevant Article of Country Z agreement provides that salaries and wages derived by an Australian resident individual in respect of employment carried out in Country Z may be taxed in both Australia and Country Z. The Article contains an exception which may give sole taxing rights to Australia if employment is carried out in Country Z; however, this is not relevant in your situation. The Article of the convention also provides that: Notwithstanding the preceding provisions of this article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the contracting states may be taxed in that state. Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements states that it has been accepted by the courts that the OECD Model Tax Convention and Commentaries provides appropriate guidance when interpreting the terms used in double tax agreements. In your case the Article of the DTA does not preclude Australia from taxing the employment income you derive from your employer in Australia. This article does not give Country Z the sole taxing rights on the income.
Under the DTA you may be eligible to claim a FITO on the tax paid in Country Z on the income.